SPECIAL REPORT-Murdoch affair spotlights UK's dirty detectives

LONDON, July 20 In a small, semi-detached house
overlooking a park in the unlovely south London suburb of
Croydon, Jorge Salgado-Reyes sits at a glass-topped desk in his
living room plying his trade as a private eye. In the corner, a
goldfish glides around a water tank. A flat screen television
hangs from the wall alongside replica samurai swords and
photographs of landscapes. Black leather sofas line two of the
walls.

The phone rings. Salgado-Reyes answers it, jots down a few
notes and consults his screen. "A non-molestation order," he
says, referring to a court order he is being asked to monitor.

Charging up to 75 pounds ($120) an hour, the dapper, goateed
gumshoe takes on cases that range from the banal to the tragic
-- tracing missing people, serving court orders, monitoring
"anti-social behaviour" such as vandalism or noisy neighbours,
checking cases of benefit fraud, or simply carrying out checks
for people who are convinced, rightly or wrongly, that their
house is bugged.

Salgado-Reyes is the acceptable face of private investigation
in Britain. But there's another side to the industry, a
subculture in which sleuths tap police contacts and criminal
informants for information that they then sell on to tabloid
reporters; where private detectives excavate nuggets that can be
used to embarrass politicians or celebrities and titillate
readers.

Of all the dark corners the country's phone-hacking scandal
has lit up over the past two weeks -- illegal tabloid tactics,
cosy ties between newspapers and the police, the press's
influence over politicians -- perhaps none are murkier than
London's private investigator underworld.

One former Metropolitan Police detective who spoke on
condition of anonymity told Reuters that in some cases the line
between private investigation and organised crime is
nonexistent.

"A number of private investigators now operate on behalf of
criminal enterprises to steal information, to try to identify
potential sources that are giving information against them, to
identify competitors, to find out where competitors keep drugs,"
the former detective said.

"And they are used by the underworld to try to infiltrate
law enforcement to find out what law enforcement knows. It's
always been like that, in fairness, but information was never in
the plentiful state that it is now."

Investigators like Salgado-Reyes say their less scrupulous
counterparts are tainting the industry.

"I know for a fact that there are some people convicted of
offences who are working as PIs," he told Reuters. "If PIs are
providing services for organised crime, then I think we are
talking about people who are already part of the criminal
world."

That could now change. An advocacy group called HackedOff
that campaigns against press intrusion is demanding that the
most notorious snoopers face an official inquiry into the
hacking scandal, where their testimony might pose a threat to
figures in Britain's establishment. It could also lead to
tighter laws around the industry, which is currently
unregulated.

"These are criminals masquerading as investigators," said
Tony Imossi, president of the 98-year-old Association of British
Investigators (ABI), the oldest representative body of private
detectives in Britain.

"ALERT, CUNNING AND DEVIOUS"

One detective in particular may hold the key to the News of
the World scandal and even the political fortunes of Prime
Minister David Cameron. Jonathan Rees, a convicted criminal who
was once acquitted of a murder charge, regularly sold
information to the News of the World and other newspapers,
according to police documents obtained by anti-corruption
researcher Graeme McLagan.

In the 1990s, Rees was a super-broker of scurrilous
information. Unusually prolific, he tended not to use the
voicemail hacking most closely associated with the News of the
World. (The Guardian newspaper reported on July 4 that the
voicemail of murdered schoolgirl Milly Dowler had been hacked by
a News of the World investigator, triggering a public outcry.)

Rees's speciality was buying information from cops and
civil servants and arranging drug stings, according to McLagan,
author of "Bent Coppers", a study of graft inside London's
police, also known as Scotland Yard. Rees would then tip off
both police and press to strengthen contacts and make money, he
wrote.

Asked to respond to the allegations, Rees's lawyer, Nigel
Shepherd, told Reuters by email that it was "not only News
International that was implicated in unlawful enquiries... the
media think only in terms of a witch hunt against News
International." He did not elaborate.

According to the Guardian, Rees's targets have included
members of the royal family, central bank officials, rock stars
Mick Jagger and George Michael, the family of Peter Sutcliffe, a
notorious serial killer dubbed the Yorkshire Ripper, and leading
politicians.

Rees even tried to undermine the Yard's internal efforts
against corruption by spreading rumours about some of the people
associated with it, McLagan reported.

"They are alert, cunning and devious individuals who have
current knowledge of investigative methods and techniques which
may be used against them," said an internal police report into
Rees and his associates cited by McLagan.

"Such is their level of access to individuals within the
police, through professional and social contacts, that the
threat of compromise to any conventional investigation against
them is constant and very real."

Rees has not been convicted of an offence in relation to his
illicit news-gathering for the media. But he has emerged as a
key figure in the scandal because he resumed working for the
News of the World in 2005 after serving a jail term for
conspiracy to pervert the course of justice in a child custody
case.

By then, the News of the World was edited by Andy Coulson.
Coulson was forced to quit in 2007 when the newspaper's royal
editor and another private investigator, Glenn Mulcaire, were
jailed for hacking into voicemail messages of aides to the royal
family. The editor, who has always maintained he had not known
about the phone-hacking, went on to work as Cameron's
communications chief.

"CONFIDENCE IN JUSTICE AT STAKE"

In April 2008, Rees and three others were arrested on
suspicion of the murder of Rees's former business partner,
Daniel Morgan, who had been found dead outside the Golden Lion
pub in Sydenham in March 1987.

Morgan was lying beside his BMW with an axe sticking out of
his head.

His family says he had discovered information about police
corruption in the weeks before his killing -- a development it
alerted police to more than 20 years ago. In the weeks before
his murder, Morgan had repeatedly expressed concerns over
corrupt police officers in south London, they say.

Rees was charged with conspiracy to murder, but the case
remains one of Britain's longest unsolved murder inquiries, in
part because of police malpractice. In March 2011, commenting on
the failure of the case, Detective Chief Superintendent Hamish
Campbell said the initial probe had been flawed and "police
corruption was a debilitating factor."

The case against Rees failed due to procedural flaws: the
prosecution said it could not guarantee that police could
satisfy rules protecting the right to a fair trial.

Documents the defence wanted to see had gone missing. And on
two occasions, material not disclosed to the defence was found
in the police's possession. The judge said the police had had
ample grounds to prosecute but the decision to pull the case was
principled and right. He recorded a 'not guilty' verdict.

Shepherd, Rees's lawyer, told Reuters: "We would point out
that Mr. Rees has been found wholly innocent of this charge,
having been acquitted on 11th March 2011."

MPs now want to know what Coulson knew about Rees's past.
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